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Microsoft poses a similar argument as Transmeta and Rambus before it -- it invested money in smartphone research, now it should be able to force licensing and/or sue competitors to compensate for its sales shortcomings.  (Source: Wikimedia Commons)
Google is "standing on the shoulders" of others -- Horacio Gutiérrez, Microsoft General Counsel

In the smartphone market, Microsoft Corp. (MSFT) has undergone a transformation from a company that makes most of its money off facilitating the sale of physical products to end consumers and businesses, to a company that makes most of its money from pursuing intellectual property enforcement.

The approach isn't altogether surprising.  Microsoft has fallen from holding nearly a quarter of the smartphone market, to having less than 3 percent of the market locked down.  In short, a year into the Windows Phone 7.x project Microsoft is thus far lagging in sales in the smartphone market despite having very innovative -- but poorly marketed -- products.

Thus Microsoft has followed in the footsteps of past companies, such as Transmeta and Rambus Inc. (RMBS) and turned to a "forced licensing" approach of trying to force more successful competitors to pay to license its IP under threat of lawsuit [1][2][3].

Microsoft General Counsel, Horacio Gutiérrez, raises a familiar argument in an interview with the SFGate, commenting that Google Inc. (GOOG) is "standing on the shoulders" of Microsoft and other smartphone IP holders with its Android mobile operating system.

This is a familiar argument, as it's similar to the argument raised by Transmeta and Rambus -- quite successfully in fact.

Mr. Gutiérrez contends, there's essentially nothing wrong with the American intellectual property system, and that the spate of recent lawsuits is just the market "readjusting" itself to innovative new products.  

He comments:

Every time there are these technologies that are really disruptive, there are patent cases. People who lived in that particular time would look and say, "What a mess, we certainly must live in the worst time from an (intellectual property) perspective. The system is broken and something has to be done to fix it."

That's the situation we're in right now. If you think of a mobile phone or a tablet computer today, they're not your father's or your grandfather's cell phone.

The devices have evolved and become so much more powerful, because they've added a number of technologies that pre-existed the new devices. In general, they use software to become general-purpose computers.

As we've seen historically, there is a period of unrest and a period of readjustment, until the claims on the ownership of different pieces of technology are well known. There's a period of actually licensing and cross-licensing that makes these issues disappear into the background.

When you buy the device as a consumer, you get it out of the box and enjoy it immediately. What you don't see is an invisible web of licensing and cross-licensing arrangements that actually make it possible.

So licensing is not some nefarious thing that people should be worried about. Licensing is, in fact, the solution to the patent problem that people are reacting so negatively about.

Of course, again, this is precisely the kind of arguments Rambus and Transmeta made to justify their tactics.  But as the analogy to these firms shows, Mr. Gutiérrez is at least correct in that there's been a lot of historical precedence for this kind of use of IP.

Microsoft's perspective echoes that of Rambus and Transmeta.  It spent the money researching the technology, and now a more successful competitor is profiting off a similar implementation.  So it should be able to gain revenue secondhand by forcing licensing.  States Mr. Gutiérrez:

[T]here are all these other features that just make the phone much more efficient, things that are embedded deeply in the operating system. Microsoft has invested for decades more money than anyone else in research and development directed toward the efficiency of operating systems. These devices have moved from having a rudimentary phone system to being a full-fledged computer, with a sophisticated, modern operating system.

In doing that, they have really stood on the shoulder of companies like Microsoft who made all these billions of dollars in investments.

Mr. Gutiérrez defends even his company's most obvious patents -- such as two GUI patents, the first of which involve loading (and displaying) webpage content before images to load webpages faster, and the second of which involves displaying a loading animation as the images load.  These patents -- U.S. Patent Nos. 5,778,372 and 6,339,780 -- were used to force Barnes & Noble, Inc. (BKS), an Android tablet-maker, into a licensing deal.

Android Browser
Like Apple, Microsoft contends that patenting GUI features is acceptable.  Microsoft is suing or forcing licensing from Android manufacturers using a patent on displaying an animation for loading images in a browser.

He argues that patents only seem obvious because people aren't educated enough to understand them.  He states, "Many times when you express those ideas at a high level, they seem obvious to anyone who really doesn't understand the particular ways in which certain effects are achieved in software.  [W]e believe they're solid patents."

This could be a good approach for Apple, Inc. (AAPL) to take.  While Apple's goals are a bit different than Microsoft's (Apple wants to ban Android from sales, rather than profit off forced licensing like Microsoft), it also has a fondness for patenting GUI animations [1][2] and then using them to sue Google.

With Microsoft and Apple are seemingly in a race to patent seemingly obvious GUI components and sue or ban anyone who outsells them in the market, the validity of software patents will likely face increasing scrutiny.

But Mr. Gutiérrez says that software patents are similar to hardware patents, so they either are both valid, or both invalid.  He comments:

But I think the most important part here is that a lot of the innovation that is happening today is really happening in the software space. Many things that earlier were implemented in hardware - think of telephone switching and circuits - are now implemented in software.

So the question of whether software should be patentable is, in a sense, the same as asking whether a significant part of the technological innovation happening nowadays should receive patent protection.

But what if Microsoft used its GUI patents to sue Apple?  Well that's unlikely as the companies have essentially a patent "truce" -- they cross-license their IP to each other.  As a result they can focus their efforts on suing or banning other parties, without having to worry about attacks from each other.

As an interesting side note, a company that has been labelled the world's largest patent troll -- Intellectual Ventures -- was founded by Microsoft's former chief technology officer Nathan Myhrvold.  Mr. Myrhvold played a pivotal role in directing the future direction of intellectual property efforts at Microsoft, during his time with the company in the 1990s.

Source: SFGate



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RE: When you can't innovate, Litigate
By JasonMick (blog) on 10/31/2011 3:02:47 PM , Rating: 1
Two points that are somewhat important here:

a) Microsoft is so far only doing this kind of tactic in the smartphone industry where its sales have essentially failed. So this may be the direction the company is headed in, but most of its divisions still primarily profit off of product.

b) As for the defense that Microsoft is innovating in the smartphone sector, that's legitimate. However, remember that the patents being applied here are mostly OLD IP from 5-10 years ago, not the results of current innovation. And remember, Rambus and Transmeta also innovated and researched at the time when they patented their IP.

Now is what Microsoft doing fair? I'll leave that up to you guys to debate.


RE: When you can't innovate, Litigate
By sviola on 10/31/2011 3:28:21 PM , Rating: 5
Let me address your points:

a) So, you are saying that MS does not defend its IP in other industries? As far as I remember, they do defend it (the FAT patent they used to sue Red Hat and SUSE is an example). I don't think it is because they failed at the mobile market, which they haven't.

b) Rambus and Transmeta are innovators and their ip is licensed and used in the market (Rambus had Intel adopt RDRAM and PS3 useds their XDRAM technology; while Transmeta has produced VLIW chips and a x86 software translator). Actually, Rambus won in court a suit against DDR producers for dumping RDRAM out of the market.

As for MS licensing, yes they are right in defending their patents, even if it makes Android fans annoyed. Google could have simply licensed MS ip or Apple's or anyone's else and protected their partners (like MS does, for instance, with h264 encoding on Windows), but they didn't, so MS is entitled to defend themselves and looking by the amount of licensing deals they have made, seems to me they are on the right site of the dispute. And, different from Apple, they are not trying to ban competition, they are just licensing their tech.


By sprockkets on 10/31/2011 4:05:02 PM , Rating: 2
a) When was RedHat or SUSE sued?

quote:
As for MS licensing, yes they are right in defending their patents, even if it makes Android fans annoyed.


Real patents or software patents, aka the ones that grind the industry to a halt like Bill Gates said?


RE: When you can't innovate, Litigate
By NellyFromMA on 10/31/2011 4:42:37 PM , Rating: 2
Eh. It's not a question of if what MS is doing is fair as it is a question of the market and system and what actions they support as conducive to success.

What is more unfair, though, is to suddenly create a paradigm policy shift and disrupt the markets-that-be to a mantra that maybe is more 'Google-esque' in the sense that someone can just claim something is obvious and then just use it without any regard for the established norms of your industry just because it suits your (not you specifically) new company of choice.

It's easy to say 'the patent system is flawed' in the same way its easy to say 'the government is corrupt' or 'the economy is never going to be the same'. Until someone else offers a FULL, COMPLETE and overall demonstratable BETTER solution, there's really no sense in even getting worked up over it.

Markets ultimately relate strongly to the rules of supply and demand. Innovation, not so much. I guess this didn't used to be true, and in fact companies would actually out innovate one another to compete. Maybe what we should be asking is when and why that changed.

Just my two.


RE: When you can't innovate, Litigate
By Jaybus on 11/1/2011 12:14:03 PM , Rating: 2
That is how it works. Company B decides that company A's IP is not really deserving of a patent and uses it anyway. Company A sues company B for violating their patent, and so it goes to litigation. That IS the norm. Who gets to decide if IP is obvious or not? The courts. No patent is worth the paper it is written on until it is challenged in court. That has always been the case.

What has changed is that the PTO used to be able to filter some of the noise, thus reducing the load on the courts. The advent of software patents, however, changed that. The PTO is inundated with software patents written in "lawyer-ese". If you can't dazzle them with brilliance, baffle them with bs. For example, the recent Apple "slide to unlock" patent (US 8,051,133). A fairly simple process, but the patent submission is 21 pages long, not including the 20 figures, and references 20 previous patents. And that is one of the really simple ones. There are tens of thousands in the PTO's backlog. Software patents are, by sheer numbers, rendering the PTO useless as a filter. They may as well approve all submissions and just let the courts figure them out. Exactly what the lawyers hoped for, I suspect, since they are always the true winners, if not the only winners, in any IP dispute.


By NellyFromMA on 11/2/2011 4:36:51 PM , Rating: 2
Interesting read. I suppose what I was getting at is that, evidentally, there is difficulty determining a valid patent from a foolish or otherwise unqualified one, therefor who is to decide was is common-sense or obvious and what is not if the established responsible party's are unable.

In the end, I was mostly calling out the question of 'Is MS's approach to patent enforcment fair' for basically asking the wrong question.

Still, you were informative.


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